Daily Analysis Report 13 May '2022
During the Asian session, the euro exhibited poor growth versus the US dollar, correcting following a significant drop the day before, causing the single currency to hit new lows for the instrument since January 2017. The EUR/USD is attempting to consolidate above 1.0400, but insufficient catalysts are for the single currency’s development. During the day, investors will focus on the release of statistics on the dynamics of industrial production in the eurozone for March. Still, current analyst projections imply that the euro will not be able to gain any support.
However, considering that the US macroeconomic calendar is similarly neutral, the instrument could increase exclusively due to technical causes. The dollar is still in great demand due to concerns about the global economy’s development prospects. Consumer inflation figures provided by the US Federal Reserve on Wednesday indicated that prices might be peaking. However, they are still high enough to prevent the US Fed from relaxing monetary tightening pressure.
GBP/USD hit its lows since May 2020 as the British pound exhibits an upswing in trading, correcting following another loss the day before. The pound’s rise on Friday is attributable to strengthening technical reasons, while the fundamental picture shifts slightly but still contributes to the continued depreciation of the British currency. The macroeconomic data issued the day before in the United Kingdom disappointed, raising fears of a probable recession. The country’s GDP decreased by 0.1 percent in March, despite analysts expecting it to rise by 0.1 percent.
In quarterly terms, growth dropped from 1.3 percent to 0.8 percent, which was worse than estimates of 1.0 percent, while in annual terms, the economy is still displaying positive dynamics, rising from 6.6 percent to 8.7 percent, just shy of the predicted value of 9 percent, according to the latest data. Although preliminary market forecasts projected a favorable trend at the level of 0.1 percent, the pace of Industrial Production in the country fell by 0.2 percent in March after falling by 0.3 percent the month before.
During the morning session, the Australian dollar is active corrective growth versus the US dollar, recovering from a severe fall the day before, which caused the AUD/USD to approach record lows since June 2020. Investors close short positions, causing a technical correction as the instrument’s fundamental picture shifts somewhat. The US dollar remains in strong demand as a safe-haven currency. Investors anticipate a further downturn in the global economy, which could be exacerbated by the world’s leading central banks’ “hawkish” stance.
Consumer inflation in the United States may have reached its high, but the reduction has been slower than analysts had predicted. There is no need to expect a swift shift in the US Federal Reserve’s monetary policy direction. If interest rates rise in the future, the American economy’s growth prospects are likely to deteriorate. Weak macroeconomic statistics from Australia are now exerting pressure on the Australian currency’s position. After gaining 3.9 percent in March, HIA New Home Sales dipped 1.2 percent in April.
In Asian trade, the US dollar recovers against the Japanese yen following a sharp drop the day before, leading to local lows re-establishing from April 27. On Thursday, the dollar displayed a negative trend versus the Japanese yen, one of the few currencies on the market. They relate this behavior to the US Federal Reserve’s “hawkish” policies, which analysts believe may slow down the country’s economic growth shortly. The Bank of Japan, for its part, is currently waiting to see what happens and has not yet begun an interest rate hike cycle.
Existing inflationary threats have a favorable impact on the Japanese economy, prone to deflationary occurrences, making the yen an attractive safe-haven currency, notwithstanding the widening interest rate differential between Japan and the United States. The yen was also helped by positive macroeconomic data from Japan released yesterday. The Eco Watchers Current Situation indicator increased from 47.8 to 50.4 in April, while the Eco Watchers Outlook index increased from 50.1 to 50.3.
During the Asian session, gold prices are recovering, retreating from the local lows of February 7, which were updated at the start of Friday’s trade. Technical corrective factors have aided the rise in quotations, while the fundamental picture still favors the dollar’s future. Despite the crossing of the peak, US inflation numbers reported in the last few days indicated that prices are still rising at an alarming rate. This may necessitate the US Federal Reserve strengthening price-control measures, such as raising interest rates.
The chances of a 75 basis point hike at the regulator’s June meeting are still slim but don’t forget that the US Federal Reserve has other options. The department may, in particular, speed up the implementation of the quantitative tightening program